Your initial offer is crucial
Your initial offer is the start the discussion – not the end point. So your initial offer should not be the maximum you would be willing to pay. Because if you do, there will not be any negotiation: it will be a take-it-or-leave-it situation for the seller!
Your objective should be to make an offer as low as can be reasonably tolerated by the seller. The difficulty is that to gauge how low the seller could “envisage” you would need to know him and his circumstances – which you won’t. So you have to take chances (up to a point) and (more importantly) be able to explain and document your offer. You can use comparables (“the house across the street has sold last month for 25% less than your asking price”) or the conditions of the property (“the roof will have to replaced and the cost is 40,000€” or “the septic tank needs replacing, and the cost is 20,000€”). The important thing is that you stick to “analytical” points to justify your price– not psychological – and that the seller accepts to make a counter offer.
Once your initial offer has been taken in by the seller, in essence you have “set the spread.” If the asking price is 510,000€, and your initial offer is 410,000€ (20% down because the house needs work), it is quite possible that the seller could settle somewhere in the middle of the spread and feel relieved that he didn’t “let go” at the bottom. Again, it’s all psychological – but important.
You should not hesitate to make cheeky offers. If a house is offered at 650,000€, has been on the market for 2 years, and requires a lot of work (to the tune of say 200,000€), you should not hesitate to offer 420,000€ for it. What have you got to lose? The seller can only turn you down. And if you get the house at your low price – you will be even happier. If not, you will move on to the next one.